Banking Banking Basics What Is a Transaction Deposit? Transaction Deposits Explained in Less Than 4 Minutes By Cheryl Wagemann Cheryl Wagemann Cheryl Wagemann has been a writer, reporter, and editor for more than seven years. She has written dozens of articles on news, economics, shopping trends, saving money, budgeting, and more. Cheryl has worked for Finder.com, Gannett newspapers, TAPinto, North Jersey Media Group, and other online publications. learn about our editorial policies Updated on November 15, 2021 Reviewed by Michael J Boyle Reviewed by Michael J Boyle Michael Boyle is an experienced financial professional with more than 10 years working with financial planning, derivatives, equities, fixed income, project management, and analytics. learn about our financial review board Share Tweet Pin Email In This Article View All In This Article Definition & Examples of Transaction Deposits How Transaction Deposits Work Types of Transaction Deposits Photo: FG Trade / Getty Images Definition A transaction deposit is a deposit made in a transaction account that can be withdrawn without delay or penalty. Banks that offer transaction deposit accounts are subject to higher reserve requirements set by the Federal Reserve than non-transaction deposit accounts. A transaction deposit is a deposit made in a transaction account that can be withdrawn without delay or penalty. Banks that offer transaction deposit accounts are subject to higher reserve requirements set by the Federal Reserve than non-transaction deposit accounts. Definition and Examples of Transaction Deposits Transaction deposits are liquid, meaning they can be cashed at any time. A checking account is an example of a transaction account from which transaction deposits can be withdrawn or made. Alternate name: Demand deposit Transaction deposits can be accessed on demand by several means, including by making a cash withdrawal at an ATM or by cashing a check at a bank branch. Conversely, non-transaction deposits are known as time deposits. Accounts that limit monthly transfers or set waiting periods for accessing funds are non-transaction deposit accounts, like savings accounts. Certificate of deposit (CDs) or individual retirement accounts (IRAs) are examples of non-transaction accounts. Withdrawals are subject to maturation periods and can result in penalty fees. How Transaction Deposits Work Under Regulation D, banks must keep a positive reserve for transaction accounts. Transaction account holders are granted unlimited transfers and payments to third parties as well as internally between accounts. Accounts are able to earn interest but do not always. In contrast, banks offering non-transaction accounts, like savings accounts, have a 0% reserve requirement. Savings account holders are only permitted six transfers or withdrawals per month. Transaction deposit funds are available on demand or within seven days if the bank requires notice, though most do not. To make a transaction deposit, you’ll deposit funds into a transaction deposit account like a checking account. When you want to withdraw funds, you have several options including using a check or linked debit card, ATM, making an internal transfer to another account, or a withdrawal slip at your local branch. Transaction deposit accounts, like non-transaction deposit accounts, are insured up to $250,000 per account, per depositor under the FDIC. Note The 2010 Dodd-Frank Act offered temporary unlimited insurance coverage to non-interest-bearing transaction accounts. The act provided unlimited coverage for two years for all of these types of accounts regardless of the amount in them. Types of Transaction Deposits Several types of accounts and financial products qualify as transaction deposits, including direct deposit and paychecks, cashier’s checks, cash, and transfers between transaction deposit accounts. It includes demand deposit and Negotiable Order of Withdrawal (NOW) accounts, which are demand deposit accounts that earn interest. A good rule of thumb to determine whether an account is a transaction deposit account is if it: Offers unlimited withdrawals and transfersDoes not set a maturity date on depositsCan be cashed on demand or within seven days, depending on the bankHas no eligibility requirements Checking accounts are usually transaction deposit accounts, and in some cases, savings accounts can be classified as transaction deposit accounts as well. Savings deposits are usually considered non-transaction deposit accounts because they generally limit activity to six transfers or withdrawals per month. However, the Federal Reserve can deem a savings account a transaction deposit account if the bank allows multiple savings accounts to be opened for the sole purpose of making additional transfers. According to Regulation D, there must not be any other reason for opening multiple savings accounts in order to qualify the accounts as transaction accounts. In this case, the bank would need to “suggest or otherwise promote the arrangement” in order for the accounts to be deemed transaction deposit accounts, meaning if the account holder opens several accounts to allow for additional transfers without consulting the bank about this purpose, the accounts are savings deposits under the law. The same exception applies to linked time deposit accounts. Key Takeaways Transaction deposits can be cashed out without restriction or a waiting period. Rarely, a bank may ask for up to seven days' notice for withdrawal.Banks that offer transaction deposit accounts are subject to a positive reserve requirement.Options to withdraw funds from transaction deposit accounts include transfers, paper checks, and debit card payments. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Federal Reserve Board. "Old-Fashioned Deposit Runs." Board of Governors of the Federal Reserve System. "Regulation D Reserve Requirements." FDIC. "Deposit Accounts." FDIC. "Notice of Expiration: Temporary Unlimited Coverage for Noninterest-Bearing Transaction Accounts." FDIC. "Selected Sections of the Dodd-Frank Wall Street Reform and Consumer Protection Act: Section 343: Insurance of Transaction Accounts." Board of Governors of the Federal Reserve System, "Federal Reserve Board Announces Interim Final Rule to Delete the Six-Per-Month Limit on Convenient Transfers from the "Savings Deposit" Definition in Regulation D." Code of Federal Regulations. "Part 204—Reserve Requirements of Depository Institutions (Regulation D)."